Transnational Capital in Somalia

Region:
Horn of Africa

Organization:
Conflict Research Unit of Clingendael Institute

Country:
Somalia

This report explores the impact of transnational businesses active in Somalia and Somaliland on socioeconomic development and governance within the territories. The economic resurgence in the country owes much to the sizeable and pioneering role played by these transnational entrepreneurs. Their willingness to invest at even the most difficult times has bridged the Somali population through a range of hard periods that saw other actors withdraw, and has pushed a degree of economic recovery and widened the availability of goods and services. Yet part of the reason that these companies fulfilled this role was that it allowed them to entrench a strong competitive position (mainly through liquidity constraints and clientelistic networks spanning the public and private sector) and allowed them to rapidly develop a range of new markets. Their positioning has hindered competition and entrenched a status quo that benefits certain sections of the political settlement over others.

The peacebuilding paradigm employed by the international community, focusing on state institutions to rebuild and stabilise post-conflict states, is brought into question by these dynamics. The transnational businesses act as a stabilising force and manage to provide a degree of governance and public services where (legitimate) governance is lacking. Yet, these conglomerates also interfere with existing political institutions: they affect the outcomes of the representative process that is supposed to deliver credible leadership at national and local level and constrain the ability of existing executive branches to take and implement decisions. Donor engagement through the diaspora suffers from the underdevelopment of the regulatory infrastructure – especially financing – and the interest structure that ensures this situation endures. The challenge in Somali regions is therefore how to engage parts of its transnational community in the creation and stabilisation of the entrepreneurial middle class, in order to stimulate economic and political development.